SEC News Digest

Issue 2012-93 May 14, 2012

Commission Announcements

SEC Suspends Trading in Common Stock of Three Hundred Seventy-Nine Companies Quoted on OTC Link

On May 14, 2012, the Securities and Exchange Commission ordered the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on May 14, 2012, and terminating at 11:59 p.m. EDT on May 25, 2012:

The Commission temporarily suspended trading in these securities because of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning the companies’ operating status, if any.

The Commission cautions broker-dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not he has complied with the rule, he should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, he should refrain from entering quotations relating to these companies’ securities until such time as he has familiarized himself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.

Any broker-dealer, investor, or other person with information relating to this matter is invited to contact the Securities and Exchange Commission at http://www.sec.gov. The Commission’s Office of Investor Education and Advocacy has information for investors and members of the general public on topics related to investing at http://www.investor.gov. (Rel. 34-66980; Press Rel. 2012-91)

Rules and Related Matters

An order has been issued on an application filed by BOX Options Exchange, LLC (“Exchange”), on behalf of Options Participants that execute trades as agent for their customers on BOX Market LLC (an options trading facility of the Exchange), for a limited exemption under Rule 10b-10(f) of the Securities Exchange Act of 1934 (“Exchange Act”) from the requirements of Exchange Act Rule 10b-10(a)(2)(i)(A). Based on the facts and representations presented in the Exchange’s application, the order provides Options Participants with a limited exemption from Rule 10b-10(a)(2)(i)(A) to the extent that Options Participants execute trades for their customers on BOX Market LLC as described in the Application. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66976)

Enforcement Proceedings

In the Matter of George Sobol

On May 14, 2012 the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against George Sobol (Sobol), a resident of Beverly Hills, California, based on the entry of a permanent injunction against him in the civil action entitled Securities and Exchange Commission v. e-Smart Technologies, Inc. et al., Civil Action No. 1:11-cv-00895-JEB in the United States District Court for the District of Columbia.

In the Order, the Commission finds that, on April 27, 2012, a permanent injunction was entered against Sobol, permanently enjoining him form future violations of Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934. The Commission further finds in the Order that the Commission filed a Complaint against Sobol, alleging that Sobol participated in the unregistered stock offering from at least March 2005 through June 2006, completing at least 19 transactions totaling over 8.8 million e-Smart shares. During this period, Sobol was not registered with the Commission as a broker-dealer or associated with a registered broker-dealer.

In the Matter of Kenneth A. Wolkoff

On May 14, 2012 the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Kenneth A. Wolkoff (Wolkoff), a resident of Park City, Utah, based on the entry of a permanent injunction against him in the civil action entitled Securities and Exchange Commission v. e-Smart Technologies, Inc. et al., Civil Action No. 1:11-cv-00895-JEB in the United States District Court for the District of Columbia.

In the Order, the Commission finds that, on April 27, 2012, a permanent injunction was entered against Wolkoff, permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 15(a) of the Securities Exchange Act of 1934. The Commission further finds in the Order that the Commission filed a Complaint against Wolkoff alleging that he participated in an unregistered stock offering from at least April 2005 through July 2006, completing at least 115 transactions totaling over 26 million e-Smart shares. During this period, Wolkoff was not registered with the Commission as a broker-dealer or associated with a registered broker-dealer.

SEC Charges China-Based Company and Executive For Concealing Loans To Benefit His Family

The Securities and Exchange Commission filed a complaint today in the United States District Court for the Southern District of New York against China Natural Gas, Inc. and Qinan Ji. The SEC alleges that China Natural Gas, a China-based natural gas company, and Ji, the chairman and former CEO, defrauded investors by secretly loaning company funds to benefit his son and nephew while failing to disclose the true nature of the loans.

The SEC alleges that Ji coordinated two short-term loans totaling more than $14 million in January 2010. One loan went to a real estate firm co-owned by Ji’s son and nephew through a sham borrower. The other loan went to a business partner of the real estate firm. Ji signed the company’s SEC filings that falsely stated the loans were made to third parties. Ji then lied about the true borrower to China Natural Gas’s board, investors, and auditors as well as during the company’s internal investigation.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Ji’s nephew approached China Natural Gas in late 2009 to obtain a loan for a large real estate development project being run by Demaoxing Real Estate Co., a firm that was 90 percent owned by Ji’s son and 10 percent owned by Ji’s nephew. Ji recognized it was inappropriate for China Natural Gas to loan money directly to his nephew, so he asked his niece’s husband, who was the company’s internal audit chief, to use a sham borrower. The internal audit chief located an individual named Taoxiang Wang, and fabricated notes of a meeting with her to discuss loan terms. Wang signed a loan agreement for $9.9 million, and the money was wired directly into a Demaoxing bank account with a note stating that the amount was for “raw material expenses.”

The SEC alleges that around the same time, China Natural Gas made a $4.4 million loan to Shaanxi Juntai Housing Purchase Co., a business partner on Demaoxing’s real estate development project. Shaanxi Juntai’s then-general manager was Ji’s friend. The internal audit chief talked with Ji’s nephew about the project when arranging the loan, which directly benefitted Demaoxing.

According to the SEC’s complaint, Ji was the company CEO until he resigned in October 2011. He approved both loans without obtaining prior authorization from the board or informing the CFO. Ji repeatedly lied to conceal the related party nature of both loans. When questioned about the loans by the China Natural Gas board, Ji falsely stated that the loans involved senior Chinese government officers who were in charge of the company’s liquid natural gas project. During a May 10, 2010 conference call about quarterly earnings, Ji responded to a question about the loans by again stating that they were made to obtain approvals from government officials. He later told the board that he made the loans to earn quick and lucrative interest, and lied about the true nature of the loans during the company’s internal investigation. Ji also lied to the company’s auditors by signing a letter stating that the two loans were for business purposes and the borrowers were not related parties.

The SEC also alleges that in the fourth quarter of 2008, China Natural Gas paid $19.6 million to acquire a natural gas company but did not timely and properly report the transaction in its SEC filings. As with the loans, Ji approved the acquisition without obtaining prior authorization from the board.

Ji and China Natural Gas are charged with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as the proxy solicitation rules and various Exchange Act provisions including corporate reporting, recordkeeping, internal controls, and false statements to auditors. Ji also is charged with violating provisions of the Sarbanes-Oxley Act that require him to repay China Natural Gas the bonuses and stock sale profits he received after the company filed false reports with the SEC.

Investment Company Act Releases

Van Eck VIP Trust, et al.

A notice has been issued giving interested persons until June 4, 2012, to request a hearing on an application filed by Van Eck VIP Trust, et al. for an order under Section 12(d)(1)(J) of the Investment Company Act of 1940 (Act) for an exemption from Sections 12(d)(1)(A) and (C) of the Act. The order would amend a prior order that permits certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies. The amended order would permit such registered open-end management investment companies to also acquire shares of registered closed-end investment companies and business development companies as defined by Section 2(a)(48) of the Act that are within and outside the same group of investment companies. (Rel. IC-30063 – May 10)

Self-Regulatory Organizations

Proposed Rule Changes

The NASDAQ Stock Market LLC filed a proposed rule change (SR-NASDAQ-2012-057), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder, with respect to the authority of NASDAQ or NASDAQ Execution Services to cancel orders when a technical or system issue occurs and to describe the operation of an error account. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66964)

The Commission issued notice of a proposed rule change submitted by NYSE Arca, Inc. (SR-NYSEArca-2012-37) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 proposing a pilot program to create a Lead Market Maker Issuer Incentive Program for issuers of certain exchange-traded products listed on NYSE Arca, Inc. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66966)

The NASDAQ Stock Market LLC has filed a proposed rule change (SR-NASDAQ-2012-059) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder to establish “Benchmark Orders” under NASDAQ Rule 4751(f). Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66972)

NYSE Arca, Inc. has filed a proposed rule change (SR-NYSEArca-2012-39) pursuant to Section 19(b) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder relating to listing and trading the Global Alpha & Beta ETF pursuant to NYSE Arca Equities Rule 8.600. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66973)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by NYSE Arca, Inc. to amend NYSE Arca Equities Rule 5.2(j)(1), the Exchange’s “Other Securities” listing standard, to delete a provision providing that if a security listed under the rule contains redemption provisions, the redemption price must be at least $3.00 per unit (SR-NYSEArca-2012-38) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66965)

A proposed rule change filed by NASDAQ OMX PHLX LLC (SR-Phlx-2012-60) to establish the PHLX depth of market data product has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66967)

A proposed rule change filed by NASDAQ OMX PHLX LLC (SR-Phlx-2012-57) relating to Complex Order fees for removing liquidity in Select Symbols has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66968)

A proposed rule change filed by the EDGX Exchange, Inc. (SR-EDGX-2012-17) relating to amendments to the EDGX Exchange, Inc. Fee Schedule has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66970)

A proposed rule change filed by EDGA Exchange, Inc. (SR-EDGA-2012-18) relating to amendments to the EDGA Exchange, Inc. Fee Schedule has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66971)

Joint Industry Plan Releases

Notice of Filing and Immediate Effectiveness of Amendment to the Options Order Protection and Locked/Crossed Market Plan

A proposed amendment to the Options Order Protection and Locked/Crossed Market Plan (4-546) filed by BOX Options Exchange LLC pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 to add BOX Options Exchange LLC as a Participant has become effective.Publication is expected in the Federal Register during the week of May 14. (Rel. 34-66969)

Securities Act Registrations

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.